How Fox's Star will expand Disney's footprint in India with streaming, cricket and Bollywood

Walt Disney Co. agreed on Thursday to buy key film and television assets of 21st Century Fox, in a $52.4 billion deal that bolsters the media-entertainment powerhouse's challenge to Netflix and emerging rivals in the streaming wars.

The deal will also expand Disney's footprint significantly in India — one of the fastest growing and largest media markets in the world — with Star TV which has 69 channels in eight languages and the streaming service, HotStar. Disney also would gain global rights to professional cricket. Disney, which runs a Disney channel and Hungama in India, already owns UTV.

Disney is buying a large part of the Murdoch family's 21st Century Fox in a $52.4 billion deal, announced on Thursday. AP

A potential streaming giant

Disney's move to acquire the Fox library of content is seen as a bid to bolster its arsenal against Netflix and Amazon as well as emerging tech players such as Facebook and Apple, which are cashing in on a move towards streaming services and away from traditional pay TV packages.

Disney, which owns the ABC television network, ESPN and has major studios in Hollywood, has been preparing to launch its own streaming service.

For Disney, owning Star India could give it an edge over competing content providers in the world’s second-most populous country.

Netflix Inc has been offering its streaming service in India for nearly two years, and Amazon.com, Inc’s Prime Video has been courting customers there for one year.

Global expansion is important to Disney because its largest US network, ESPN, has been losing subscribers as audiences migrate from traditional television to digital viewing.

India represents the second-largest subscription TV market in Asia, with 154 million households in 2016, according to consultancy PricewaterhouseCoopers, which projected that number will grow to 167 million in 2021. Mobile video traffic, meanwhile, is booming. KPMG expects it will grow at a compound annual growth rate of 68 percent between 2016 and 2021.

Star India is also flush with cash. Fox projects it will earn $500 million before interest, taxes, depreciation, and amortisation in fiscal 2018, rising to $1 billion in 2020.

“Star India alone is by far the most successful TV network in the fastest-growing country,” Macquarie Research analyst Tim Nollen told Reuters.

The lucrative world of Indian sports

Global sports rights, particularly cricket which Fox recently won, should add to Disney’s bottom line. “In India there is religion, there is cricket and there is Bollywood,” said Prem Parameswaran, chief executive of North America for Eros International Plc, a distributor of Indian movies, shows and music that also has an online streaming service.

In September, Star paid $2.55 billion for broadcast and digital rights of the Indian Premier League (IPL), beating Facebook which also bid.

Disney enters Bollywood

The deal also could allow Disney to boost its film business in India, where the vast majority of movies are local Bollywood releases, Parameswaran said.

Disney had produced Bollywood films through its Indian film studio, UTV, but recently has focused instead on promoting its global English-language blockbusters in the country.

With the acquisition of Star, Disney may decide to return to local-language film production through UTV for distribution on TV or streaming, Parameswaran said.

“They could now have the ability to create films and offer them exclusively to their viewers, rather than through the box office,” he said. “There are a lot of synergies here.”

The blockbuster stock transaction also vastly reduces the Fox media empire built by Rupert Murdoch, leaving the 86-year-old tycoon and his two sons with a more tightly focused group which includes the Fox broadcast network, Fox News Channel and sports channels.

It will see Disney acquire the vaunted Fox Hollywood film and television studios, cable entertainment networks and international TV businesses, bringing popular entertainment properties including X-Men, Avatar, The Simpsons, FX Networks and National Geographic into Disney's portfolio.